Forensic Accounting Today

Should You Call a Financial Investigator?

Financial investigators, often referred to as forensic accountants, are increasingly being called upon by lawyers, corporate governance officers, government officials, and others...to ferret-out monetary and other pertinent facts and data in a wide variety of situations. You may be faced with a matter, now or in the future, in which a specially-trained financial "bloodhound" is needed.

Financial Investigations Defined - According to the IRS, "Financial investigations are usually very document-intensive. Specifically, they involve records, such as bank account information, real estate files, motor vehicle records, etc., which point to the movement of money. Any record that pertains to or shows the paper trail of events involving money is important. The major goal in a financial investigation is to identify and document the movement of money. The link between where the money comes from, who gets it, when it is received and where it is stored or deposited, can provide proof of criminal activity."

Types of Forensic Accounting Cases - Financial investigators are typically retained by lawyers, business-owners, government agencies, bankers, lenders and investors to help protect the interests and rights of individuals and organizations involved in the following types of cases:

• Mergers and acquisitions due diligence
• Shareholder and partnership disputes
• Economic crime and other criminal investigations
• Personal injury claims / motor vehicle accidents
• Business interruption and property loss claims
• Employee dishonesty (fidelity) claims
• Business/employee fraud investigations
• Corporate internal investigations
• State and city government investigations
• Ethics hotline and whistleblower allegations
• Business contract disputes and economic losses
• Professional malpractice/negligence
• Divorce litigation
• Other types of civil litigation
• Mediation and arbitration
• Specialized audits
• Tax investigations
  

When you're faced with one of these situations, you should indeed consider how a forensic accountant might serve your needs. Discussing things with your lawyer or CPA might be your best next-step, as they can help you determine if and when a financial investigator is needed. In addition, these experts can help with the identification and retention of one or more well-qualified financial professionals.

Forensic Accounting Today = New Blog Name

The Solo Accountant Reporter has a new name: Forensic Accounting Today. This change reflects the direction in which my practice has been evolving over the past few years. Future posts will be centered around the specialized service niches in which I am now almost entirely focused:

   1)  Fraud investigation, dispute resolution and litigation services

   2)  Workout, turnaround and bankruptcy services

   3)  CFO/Controllership and fraud risk mitigation services. 

Since I still provide managerial-type CFO/Controllership services, albeit to a lesser extent, and since I plan to continue operating as a solo practitioner, previous posts relating to these topics will be left intact. I'll continue to post about these areas in the future, but with a strong emphasis on how internal and outsourced financial executives and managers might best address antifraud, internal investigations, and financially-distressed business situations.

I encourage you to comment to this post and others, to let me know your thoughts and the specific topics/issues you'd like for me to address in future posts. Thank-you for your readership!

Keep Your Business "On Track" During Tough Times

We are currently faced with tough and uncertain economic conditions. I believe the business climate will deteriorate further over the next 12 months. No matter what type of business you operate, or how successful it's been, times like this call for heightened attention with respect to the management of your organization. 

It's hard enough to keep a business on the correct path during a strong economy. The challenges are much greater as things turn sour. As a business owner, you and your executives and managers must pay careful attention to all aspects of your operations and make needed changes on a timely basis. Here are several suggestions to help you prevent your company from losing its course and "running off the tracks."

Work as a team - Meet with your key executives and managers to establish fresh buy-in from each person. Make sure you're all working towards the same objectives under carefully-aligned operational and departmental strategies.
Set clear expectations - Every person in the organization should know clearly what is expected of them. These expectations ought to stem from group and one-one-one discussions and should be documented in writing. Regular employee performance reviews should be conducted to ensure expected levels of performance is maintained. Consider tying compensation to actual performance.
Update financial forecasts - Working with your team, collectively agree on detailed P&L, cash flow, and balance sheet forecasts...by month for the first year and annually for next two years. These should be supported by detailed revenue (by product/service and by customer), gross profit, personnel and operating expense budgets. Use this process to identify unprofitable customers, product lines, and business segments, along with cost-reduction opportunities.
Manage cash flow and working capital - Use an Excel-based 13-week rolling cash flow forecasting tool to track expected and actual receipts and disbursements. Pay particular attention to collections of customer receivables and inventory purchase decisions, as well as management of vendor payables...to help ensure cash and working capital positions are healthy.
Evaluate debt/equity structure - Consider how the company's overall financial strength might be improved by a restructuring of debt instruments or through obtaining new debt or equity financing.
Demand timely management information - Implement a daily/weekly "dashboard reporting system" to highlight the key performance indicators for your business, and insist on receiving a complete financial statement reporting package within 3-10 days after each month-end.
Create a positive work culture - In tandem with items 1 and 2, above, enlist the full support of all employees and team members through creative team-building and other exercises and initiatives.
Perform a SWOT analysis - Create a short-term "SWOT" team to take a hard look at your organization's strengths, weaknesses, opportunities, and threats. Develop cost-effective strategies, plans, and budgets around the results of this study.
Streamline and document processes - Over time, problematic inefficiencies and bottleneck situations can creep into your business. Carefully analyze how tasks and paperflow work their way through the organization. Develop "current state" and "desired state" flowcharts and narratives to document and streamline key process areas. This overall exercise is a perfect time to evaluate risks (i.e. what can go wrong?) in your organization and which preventive and detective controls to put in place to mitigate the risks.
Consult with outside professionals - Where cost-effective, utilize specialized contract professionals or professional service firms to assist you on an as-needed basis with any of the items listed above. 

Small Company Controller's To Do List

Until each of these ten items are successfully resolved by a small company controller, they should remain on his or her To Do list. Here they are, in no particular order:

1. Get financial statements up-to-date...and accurate.
2. Prepare operating and capital budgets for next 12 months.
3. Generate weekly and monthly cash flow forecasts.
4. Identify, track, and analyze Key Performance Indicators (KPI) for the business.
5. Work together with company executives and outside accountant to design and implement appropriate internal controls.
6. Document and improve accounting policies and procedures.
7. Establish and maintain a well-organized system of files and records.
8. Implement a staff training and development program...then delegate more work.
9. Enroll in TMU (Teach Myself University) and adhere to a multi-faceted and ongoing self-improvement progam.
10. Get the job done...while maintaining overall balance in life.

Clean Up Those Messy Books!

Extremely poor accounting records are a major problem for many businesses. Inaccurate and delinquent financial statements and other information can create havoc within a business. Making good business decisions is difficult when you have little confidence in the financial data you receive. Left uncorrected, the effects of messy books will take an increasingly negative toll on any company. You should act now if your organization is suffering from this situation. Hear are two suggestions:

1. Hire a stronger accountant to correct the problem, or retain outside professional assistance on an interim or part-time basis to get things under control;
2. Don't worry right now with cleaning-up prior months. Focus first on generating an accurate balance sheet for them most recent month-end. For each subsequent month, demand timely and accurate balance sheets and income statements. Later, it may be necessary to correct the accounting for earlier periods, but at least you'll now have the financial data needed for current decision-making.